U.S. stock markets closed at record highs on Friday following positive developments on U.S.-China trade negotiations. Moreover, soft inflation data boosted market participants’ expectations of another round of interest rate cuts by the Fed this week. All three major stock indexes ended in positive territory.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) advanced 0.7% or 337.47 points to close at 47,544.59, marking a new record close. Notably, 21 components of the 30-stock index ended in positive territory, while nine finished in negative territory. At the intraday high, the blue-chip index touched a record 47,564.52.

The tech-heavy Nasdaq Composite finished at 23,637.46, climbing 1.9% or 432.59 points driven by the strong performance of AI semiconductor bigwigs. This marked a fresh record close for the index. At the intraday high, the tech-laden index touched a record 23,658.66.

The major gainer of the index was QUALCOMM Inc. (QCOM Quick QuoteQCOM - Free Report) . The stock price of the semiconductor behemoth jumped 11.1% after unveiling a new AI chip for data centers. QUALCOMM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 appreciated 1.2% to finish at 6,875.16.69, reflecting the first closing in its history above the crucial technical barrier of 6,800. At the intraday high, the broad-market index touched a record 6,877.28. The benchmark ended in green for the third consecutive day. 

Out of the 11 broad sectors of the broad-market index, 10 ended in positive territory, while one was in negative territory. The Communication Services Select Sector SPDR (XLC), the Consumer Discretionary Select Sector SPDR (XLY) and the Technology Select Sector SPDR (XLK) rose 1.4%, 1.4% and 1.9%, respectively. 

The fear gauge, the CBOE Volatility Index (VIX) fell 3.5% to 15.79. A total of 19.76 billion shares were traded on Monday, lower than the last 20-session average of 20.85 billion. Advancers outnumbered decliners on the NYSE by a 1.74-to-1 ratio. On Nasdaq, a 1.21-to-1 ratio favored advancing issues.
The S&P 500 recorded 37 new 52-week highs and three new 52-week lows. The Nasdaq Composite registered 132 new 52-week highs and 57 new 52-week lows.

Positive Development on U.S.-China Trade Deal

On Oct. 27, President Donald Trump said that he expects the United States and China to enter a trade deal following his meeting with Chinese premier Xi Jinping on Oct. 29 in South Korea. Trump said, “I have a lot of respect for President Xi, and we are going to come away with the deal.”

The trade conflicts between the United States and China escalated this month. On Oct. 9, China’s Ministry of Commerce issued a notification requiring all foreign companies to obtain a license to export products from China that contain more than 0.1% of rare earth minerals, whether sourced from China or manufactured using Chinese extraction, refining, magnet-making or recycling technology. 

The new rule will be effective Dec. 1. China supplies around 70% of global rare earth minerals, critical components for today’s high-tech world. The United States is a major importer of rare earth minerals considered, extremely valuable and necessary inputs for the semiconductor, defense and automobile industries.

On Oct. 10, the U.S. government retaliated by imposing another 100% tariff on Chinese exports to the nation over and above what has already been imposed on these products. At present, Chinese goods are subject to an average 40% tariff in the United States. The new tariff of another 100% will be effective from Nov.1. 

Rate Cut Expectations

After the release of benign CPI data for September, investors are expecting more cuts in the interest rate this year. The CME FedWatch interest rate derivative tool currently shows a 97.8% probability that the Fed will reduce the Fed fund rate by 25 basis points in October and a 92.8% probability that the central bank will further reduce the rate by another 0.25% in December.